Swiss iron ore firm Ferrexpo has dramatically cut its cost of borrowing with a new US$420mn pre-export finance facility.

The five-year loan from nine banks sees the firm pay just 225 basis points over Libor.

The firm has the majority of its assets in Ukraine and the newest loan is a huge saving on the 700 basis points over Libor paid by the firm in a similar December 2009 facility, when rumours of Ukraine sovereign default were rife and a number of companies in the country refused to pay back debts.

The improved offering also comes as the iron ore firm posted a 2011 interim report showing a 112% rise in profit before tax to US$325mn and no net debt.

ING, Unicredit and Société Générale acted as coordinating mandated lead arrangers on the deal.

Joining the MLAs was WestLB, ICBC, ABN Amro, Credit Suisse, JP Morgan and Citi.

The facility can be drawn at any time during the loan term.

“This new credit facility is testimony to the strength of Ferrexpo’s balance sheet and the quality of the business,” says Chris Mawe, chief financial officer at the firm.

“The size and tenor of the facility complements the group’s recent US$500mn Eurobond issue and provides the necessary financial flexibility to continue to develop the group’s significant project pipeline.”

Iron ore producers have experienced a strong year to date, with China’s demand still increasing and larger miners such a Rio Tinto predicting that there will be a 100mn tonne compounded deficit in ore needed each year if production isn’t ramped up.